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Transcript of a Press Briefing by Gerry Rice, Director, External Relations Department, International Monetary Fund

Washington, D.C.
Thursday, February 14, 2013

MR. RICE: Good morning, everyone, and welcome to this press briefing from the IMF. I'm Gerry Rice, the Director of the External Relations Department. Welcome to colleagues in the room and we'll be taking questions online this morning as well. As usual, this briefing is embargoed until 10:30 a.m. Washington time. I just have a very brief opening piece of information and then we'll go straight to your questions.

Managing Director Christine Lagarde is traveling to Moscow where she and First Deputy Managing Director David Lipton will attend the G-20 Finance Ministers and Central Bank Governors meeting on February 15 and 16 this weekend. We are anticipating that there would be press interaction, press availability, with Madam Lagarde probably Saturday afternoon, but we'll come back to you on that to confirm. With that let me turn to your questions.

QUESTIONER: Gerry, good morning. For Greece, did Mrs. Lagarde meet with Mr. Stournaras in Brussels? Can you tell us if they met in Brussels during the Eurogroup?

MR. RICE: I don't have anything specific on that. It certainly wouldn't be unusual to meet with ministers at these meetings in Brussels.

QUESTIONER: Mr. Stournaras, the Finance Minister of Greece, said that he is going to ask the IMF for clarifications on what impact errors in its calculations have had on the fiscal adjustment program of Greece. What is your comment on this?

MR. RICE: I think I'd like to step back and maybe clarify. Without commenting on what Mr. Stournaras has said, I think there are some deeply mistaken impressions that have taken hold in Greece. Just to remind what the Fund has said, including in Olivier Blanchard's opinion piece published in a Greek newspaper just a few days ago, the impact of the multiplier assumption on economic outcomes has been dwarfed by other factors. As he said, Greece suffered a period of political instability and poor program implementation. Very tight liquidity and credit conditions ensued as people lost confidence in Greece's prospects within the euro. At the same time, problems in the broader euro zone put a barrier in front of Greek export growth. And it's these conditions that squeezed the real economy. Again, as regards the multiplier, reasonable assumptions were made at the time and they were rapidly updated as events unfolded. The program has already been changed in response to the various adverse developments, indeed at the urging of the IMF, and the program now incorporates a lower amount of fiscal adjustment and a longer period for fiscal adjustment. In addition, Greece has sought and received debt relief. I think the task now is implementation of the program that has been so recently agreed.

QUESTIONER: After you admitted that they were mistakes in the Greek program because of the fiscal multipliers, can some key areas of the program change? Can the mixture of the measures change in the future?

MR. RICE: I think I've just answered that. All I can say is that to address the deep challenges Greece faces the government is implementing an economic program that is supported by the European partners and the IMF, and that has been recently agreed by all concerned. The program has been adapted to Greece's implementation capacity and Greece has sought and received debt relief. The key to resolving the crisis continues to lie with Greece. As I just said, the task now is implementation of the agreed program.

QUESTIONER: The minister yesterday has criticized Mr. Blanchard and the IMF for the fact that you admitted the mistake. Today a few hours ago the spokesman for Mr. Rehn said that the role of the fiscal multipliers is limited. Would you like to comment on this?

MR. RICE: I think I just explained this. In terms of Mr. Rehn's statement, I think we're in full agreement on the recently agreed program and the priority of implementation. Let me turn away from Greece for a second. Are there other questions in the room?

QUESTIONER: Good morning. I was wondering if you could comment on Egypt. Egypt expects the IMF mission to come back to the country this month since they've completed the economic program that was required. So I was wondering if you could give a specific date or confirm that or any other comments on how Egypt's program is doing. Thank you.

MR. RICE: I don't have any specific dates for you. We understand that the Egyptian authorities have been working on revising their economic program and once this step is completed, we'll discuss the timing of a possible mission to Cairo to assess the revised program. Let me add, as we've said before, that we are willing to provide financial assistance for an economic program in Egypt that addresses the current economic and financial difficulties, is socially balanced and has broad ownership so that it can be implemented effectively.

QUESTIONER: To follow-up, they said that they have completed their economic program yesterday. Have they been in touch with you about that?

MR. RICE: We're in constant discussion with the Egyptian authorities, but as far as I am aware, we have not yet received the economic program.

QUESTIONER: Two questions on South America. One is about Venezuela. Last week the government announced the devaluation of the bolívar by 30 percent. I wanted to know your comment on that. Also, on Argentina, the authorities on Buenos Aires ordered a freeze of the prices in supermarkets for two months to fight inflation. I wonder what your opinion is on that issue. Thank you.

MR. RICE: On Argentina and the prices, I really don't have much to offer on that. On the Venezuela question, we welcome the policy measures announced by the Venezuelan authorities last week that can help reduce macroeconomic imbalances. Our sense is that more could be done and we encourage the authorities to continue their efforts to remove all distortions in the foreign exchange system. We hope that the authorities will take further actions to reduce economic vulnerabilities, improve the business climate, and achieve sustainable output and employment growth.

I have a question online: "What is your outlook for the Dominican Republic? And when will you have a post-program monitoring mission?" On GDP growth, we forecast that the economy in the Dominican Republic grew by 4 percent in 2012 and we expect that growth will decelerate to 2.2 percent in 2013, indeed, as the IMF mission chief said recently. On the post-program monitoring, I can confirm that the Executive Board agreed on post-program monitoring, but I don't have a date to offer at this stage.

There is one more question online: "The IMF mission has recently left Ukraine and is expected here back in March. Mr. Jarvis," that's the IMF mission chief, "left some economic recommendations and said nothing about the political situation. Will the political situation somehow impact the IMF's final decision on Ukraine?" On that I'm just going to be in line with Mr. Jarvis and I won't comment on the political situation, but I can refer you to the statement that we issued on Ukraine just two days ago, earlier this week.

QUESTIONER: Good morning. The largest economic institute in Greece predicts that the unemployment rate will rise this year up to 30 percent. What is your comment?

MR. RICE: I think the unemployment and the other economic challenges facing Greece are the reason that we are working with the Greek authorities and with our European partners to support the economic program that has been agreed. Again, I think the key now including reviving growth and addressing the unemployment challenge, is to implement the program. That's the key.

QUESTIONER: Mr. Rice, you are aware of course that people in Greece have great difficulty paying their taxes and there was a decline in tax revenue in January. How is the IMF dealing with this situation and the effect that it has in the implementation of the program?

MR. RICE: I think you probably know that the IMF has consistently and for some time been urging further progress on tax reform in Greece. We continue to believe that not enough progress has been made, and, as we've been saying for some time, it needs to be urgently addressed. In this context, we welcome the appointment of the new Secretary General and look forward to working with him and the government during the next review, which is upcoming at the end of this month, to get reforms in this critical area on track, so this is of critical importance.

QUESTIONER: I was wondering is the IMF concerned about the recent moves in the yen and do you expect the issue to be in the spotlight at the Moscow G-20 summit?

MR. RICE: I think you're referring to the recent moves in exchange rates and the so-called talk of currency wars which we feel is overblown. Our multilateral assessment does not indicate very significant deviations from fair value for the relevant currencies. At the same time, responding to your question, these are obviously developments to watch with an eye on a cooperative approach and of course the IMF will do its part in this effort.

I'm going to take one more question on Greece and call it a day because I don't want this to be the Greek press conference. You have a Cyprus question?

QUESTIONER: Gerry, can you tell us if the IMF Cyprus team sees a program for Cyprus after the elections?

MR. RICE: Just to repeat what I've said here the last time on Cyprus: we continue to work with the Cypriot authorities and with our partners in the European Commission and the European Central Bank to develop a durable solution for Cyprus's banking sector problems at low cost to the taxpayer and consistent with debt sustainability. On your question about the elections, to repeat what I said the last time, we expect engagement with the new administration post-election to advance discussions on a potential program.

QUESTIONER: Gerry, if I may, did you talk with candidates in Cyprus?

MR. RICE: I don't have anything on that.

QUESTIONER: Can you give us an answer later?

MR. RICE: I'll come back to you. I don't have anything on that. The last question on Greece.

QUESTIONER: Gerry, the issue of minimum wage was brought up again. The question is: are you going to discuss this issue with the Greek government when Mr. Thomsen and the Troika visit Athens next month? The second one is: do you believe in this period of time that the reduction of the minimum wage must be one of the basic priorities of the Greek government in order for Greece to become more competitive?

MR. RICE: I want to not preempt the review mission that's taking place at the end of the month so I won't get into details of the program. And to repeat again that the program as currently agreed is aimed primarily at restoring growth and jobs to Greece and the key now is implementation of the agreed program.

There is a question online about Hungary: "Market analysts say Hungary's U.S. dollar bond issuance killed chances of a credit deal with the IMF. Varga said today the government will decide in a few weeks whether to continue talks with the IFIs. Local media also reports that the Fund's Resident Representative office will be closed." I don't really have a comment on the bond issuance, but I can say categorically that there are no plans to close our office, so I hope that that's helpful.

There is a question about the G-20: "What message will Madam Lagarde unveil at the G-20 finance ministers and central bank governors meeting?" Given that that meeting is just about to get underway, I wouldn't want to preempt the discussions there. I think we all broadly have a sense of what the agenda is, where we are in the crisis, the status, growth and jobs, the question of debt, fiscal sustainability and completing the work of financial sector reform. I will leave that question there.

QUESTIONER: Just to follow-up on the G-20, I find it quite interesting that based on your work you don't see anything worrisome about currencies and volatility. We just had calls today from the chairman of the G-20 from Russia saying they want stronger language on currency manipulation. Do you think this is not needed at the moment, this is not justified to take a stronger G-20 position against it? A second question on Cyprus: there has been talk of plans to have uninsured investors contribute to any debt reduction in Cyprus. Is there any IMF position on this?

MR. RICE: I wouldn't go much beyond what I said on the currency issue, obviously, and as I said, there are developments to watch and with an eye on a cooperative approach the IMF will play its part. Of course, as you well know, the G-7 made a statement just a few days ago on this issue, so again I don't have much to add.

QUESTIONER: But what will be the IMF’s part?

MR. RICE: As you know, as the premier institution for urging cooperation, for facilitating cooperation among our member countries, the IMF is in a position to help facilitate that cooperation, so that that's the role that we play.

On Cyprus, I would repeat that the discussions are ongoing and we're looking for a durable solution to Cyprus's banking sector problems at low cost to the taxpayer and consistent with debt sustainability.